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A Special Message From The President of Strunk & Associates, LP...

The Federal Reserve recently released new amendments to Regulation E that affects ALL financial institutions. Every institution will need to obtain an affirmative opt-in decision from each checking account customer before the financial institution can charge a fee for paying an overdraft caused by either a one-time debit card transaction or an ATM withdrawal. This regulation goes into effect on July 1, 2010, but it would be a deadly mistake to wait until then to do anything!

Now is not the time to "go it alone." Strunk is already advising clients on proactive steps to take in: service design, best practices, consumer education and staff training to minimize the impact of recent regulatory changes on service charge income. Regardless of what kind of overdraft program you use today, let Strunk help you provide the same level of service to consumers. Your fee income will take a substantial "hit" if you don’t start getting consumers to "opt-in" for POS/ATM overdrafts NOW!

Last week I talked to a couple of CEO’s and I wanted to share their stories with you. Both of them were shocked to learn what portion of their fee income was derived from POS/ATM overdrafts.

The first financial institution is located in a rural market, has $155MM in assets and has approximately 5,000 checking accounts. I told him that at least 40% of their NSF/OD income came from overdrafts caused by debit card and ATM transactions. He said he didn’t know what his number was but he doubted that more than 20% of their NSF/OD income was derived from POS and ATM overdrafts. After returning to the office, the CEO called and said that he had reviewed their numbers and 62% of their NSF/OD income had come from POS/ATM overdrafts…not 20%! This means that 62% or $400M of the financial institution’s NSF/OD income is going away July 1st if they don’t do anything!

Another CEO from a $60MM financial institution called last week and told me that they are going to "pre-empt" the amendments to Regulation E by turning off access to overdrafts from POS and ATM transactions! He had no idea that this would substantially impact his bottom line since they do not get reports detailing the source of overdraft fee income. After some fact finding, the financial institution was going to give up nearly $10M per month. This institution only makes $25M per month (0.5% ROA), so this decision would have cost them 40% of their net income! After discussing this with the CEO, they have since given access to overdrafts from POS/ATM’s!

Hopefully, you can benefit from these experiences. As you know, Strunk & Associates is the industry’s premier and most successful provider of discretionary overdraft programs. Our program, unlike some others, has always been a fully disclosed and consumer-centric service. We have always provided our clients with the industry’s most robust compliance and regulatory support. The expanded Regulation E and the recent amendment to Regulation DD are just the beginning of the challenges to your financial institution.

I urge you to contact us at toll free 800-728-3116 if you have any questions regarding the impact this regulation will have on your financial institution. We can minimize the financial loss if we start soon!

Mike Sobba

President

Strunk & Associates, LP

Phone:

(281) 440-1440

Toll Free:

(800) 728-3116

Fax:

(281) 440-1499